Author Topic: So we're basically on track for a bear market by tomorrow?  (Read 12326 times)

MissNancyPryor

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #50 on: December 21, 2018, 02:59:46 PM »
If I was still in the major accumulation stage I would be very pleased at getting bargains.  If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.  The Big Ugly Event has always been possible and this one is trying to break a few mirrors and turn those who eyeball it into stone. 

It is only now that I am within just a few short months of being RE that I am getting the jitters about going on the planned date.  Who quits a high paying job in the face of a market headwind like this?  I feel I would be a fool to jump out during an active slide.  So I am piling up cash in a higher yield money market and with rising interest rates this is a good alternative to bonds to set up my retirement allocation.

It is a bummer to anticipate a near-retirement that might be delayed.  It was hard enough to follow through with that goal date for all the usual psychological reasons but now this is making me wobbly.  I know chickens are on sale and I should be buying and I will again once I get more cash on the pile.  This is a real time exercise in adjusting my attitude and thinking through what I would do in the future.             

Slow&Steady

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #51 on: December 21, 2018, 03:04:54 PM »
Payroll contribution made today... I feel like I just found the coolest ____ on the clearance rack!

Yeah, maybe my new ___ will get marked down more tomorrow but then I would have wait until tomorrow to own it. Or maybe my new ___ will not be marked down any further and this is the last mark down before the "store" takes it off the shelf. Or what if the store decides that there was enough interest in my new __ at a higher price point and they re-shelf them all at the new price.  I will buy my new ___, that I was going to buy anyways, and celebrate that the store was having a sale so I was able to buy more!  Maybe the next time I go to the store they will still be on sale or there with be a whole new sale!!

sol

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #52 on: December 21, 2018, 03:07:15 PM »
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.
[/qutote]

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

FIRE47

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #53 on: December 21, 2018, 03:52:56 PM »
Almost there now folks buckle up.

The inability to hold early gains and the violent action that keeps happening at the end of the day would point to the fact that we still have a few days of this left - a technical forum I was looking at predicted a high 90% chance of the S&P 500 hitting a technical bear before recovering - although that isnt saying much in a random walk we are 2% from a bear and 18% from a recovery.

Then again not sure how the holidays will affect this kind of a drop in progress.

Once you cross 20% you may start to see some panic sellers getting shaken from the tree and well be on a real downward trend then.





« Last Edit: December 21, 2018, 03:55:24 PM by FIRE47 »

Mr. Green

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #54 on: December 21, 2018, 04:43:43 PM »
If we see a bear market it means we're likely to see the bottom by the end of next year. Since most bear market hit bottom in 12-18 months after the 20% drop trigger, 2020 could be a bang up year for returns!
« Last Edit: December 21, 2018, 04:48:53 PM by Mr. Green »

fuzzy math

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #55 on: December 21, 2018, 04:46:19 PM »
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

Thanks for this. I had always considered the option you listed above as a risk mitigator but now I see how that isn't true... (not that I'm anywhere near being able to utilize it).

pecunia

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #56 on: December 21, 2018, 05:32:04 PM »
Almost there now folks buckle up.

The inability to hold early gains and the violent action that keeps happening at the end of the day would point to the fact that we still have a few days of this left - a technical forum I was looking at predicted a high 90% chance of the S&P 500 hitting a technical bear before recovering - although that isnt saying much in a random walk we are 2% from a bear and 18% from a recovery.

Then again not sure how the holidays will affect this kind of a drop in progress.

Once you cross 20% you may start to see some panic sellers getting shaken from the tree and well be on a real downward trend then.


Looks like everyone basically has to wait until after Christmas for more depressing news. (or maybe not)

https://www.kiplinger.com/article/investing/T038-C000-S001-is-the-stock-market-open-on-christmas-eve.html

I wouldn't expect too much more gloom and doom on the 24th since it is a partial day of work for most of Wall Street.

Many of you wish to take part in this stock market dip and increase investments and wait for the recovery.  I hope there are a lot of people like yourselves out there.  The holidays may give people a time to consider this course of action.


MissNancyPryor

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #57 on: December 21, 2018, 06:11:42 PM »
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

Thanks for this. I had always considered the option you listed above as a risk mitigator but now I see how that isn't true... (not that I'm anywhere near being able to utilize it).

Thanks @sol.  Good point.  I haven't figured out what my drawdown strategy will be or how frequently to replenish the "spendable money" when I push away from the dock.  I do want to be able to pick up bargains so developing some harvesting and planting techniques will be my new education for the next several months.   

On a happy note, I just saw the VWUAX cap gains to my brokerage account and see that I got a bunch of less expensive shares with the reinvestment.  I am not sure why the payout was so large and am not sure if that will be sustained annually-- I have only had this fund 15 months so I haven't seen enough to trust it (history only went back a couple years online).  As long as dividends don't get cut I can pay for most of my expenses with that and not worry about growth at all.  Feeling better.     

2Birds1Stone

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #58 on: December 21, 2018, 06:42:46 PM »
Great point Sol.

As much as I like to stir the rose colored glasses pot, you make some good points.

stuckinmn

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #59 on: December 21, 2018, 06:49:01 PM »
I did some inadvertent market timing that actually worked in my favor due to blind luck. 

I was consolidating my IRAs into my 401k in order to clear the deck for backdoor roths.  In the short time it took for the check to go from vanguard to fidelity the market dropped 6%. As Tom Petty once said, even the losers get lucky sometimes.

elaine amj

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #60 on: December 21, 2018, 07:29:47 PM »
I just dumped another $7k into the market yesterday for my kids' education funds. And have another chunk to invest that I will do next week (hopefully MOnday morning when the markets re-open if I have time).

Kinda scary though, when DH just retired.

Our stash is down by about $275k since last month.

Most of this is money we aren't going to touch for at least another year and a half so that mitigates somewhat.

I imagine you are withdrawing about 4 or so % each year? So you wouldn't be selling your entire stash at once, right? I figure even if I have to sell my stocks at a less than optimal level (i.e. when the market is low) to fund my expenses, it really is only a very small amount of the entire stash. The next time I sell, it's more likely that the market will be higher. Sort of DCA in reverse :) I can't always have the bad luck of selling at a ridiculously low price year after year after year. (I hope I'm understanding all these withdrawal strategies right)


If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

I'm going to have to think on what you said a bit more. I just FIREd last month. My thoughts were to keep a 1-2 year cash/HISA/GIC reserve on hand and keep an eye on the markets over the next 1-2 years to replenish the cash reserves when the market is good. Rinse and repeat year after year. I guess yet another form of market timing, hmm? Maybe we will keep a year of cash and just keep withdrawing annually using our asset allocation to replenish that.

mrmoonymartian

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #61 on: December 21, 2018, 08:03:29 PM »
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

I'm going to have to think on what you said a bit more. I just FIREd last month. My thoughts were to keep a 1-2 year cash/HISA/GIC reserve on hand and keep an eye on the markets over the next 1-2 years to replenish the cash reserves when the market is good. Rinse and repeat year after year. I guess yet another form of market timing, hmm? Maybe we will keep a year of cash and just keep withdrawing annually using our asset allocation to replenish that.
The most important thing is to stick to the emotionally neutral plan you previously made to cope with SORR - whether it includes use of a cash/bond tent or not.

One

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #62 on: December 21, 2018, 11:16:04 PM »
I heard something about the hedge funds forced selling into the year end to lock in less losses than their competitors. This could be a technical thing exacerbating the sell off? hopefully when the new year hits things will turn.

LAGuy

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #63 on: December 22, 2018, 08:41:40 AM »
If I was still in the major accumulation stage I would be very pleased at getting bargains.  If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.  The Big Ugly Event has always been possible and this one is trying to break a few mirrors and turn those who eyeball it into stone. 

It is only now that I am within just a few short months of being RE that I am getting the jitters about going on the planned date.  Who quits a high paying job in the face of a market headwind like this?  I feel I would be a fool to jump out during an active slide.  So I am piling up cash in a higher yield money market and with rising interest rates this is a good alternative to bonds to set up my retirement allocation.

It is a bummer to anticipate a near-retirement that might be delayed.  It was hard enough to follow through with that goal date for all the usual psychological reasons but now this is making me wobbly.  I know chickens are on sale and I should be buying and I will again once I get more cash on the pile.  This is a real time exercise in adjusting my attitude and thinking through what I would do in the future.             

To me, the obvious answer is you don't retire yet. I've always wondered how people come up with firm retirement dates, other than age related (i.e. I'm 65 time to go), given just how volatile market returns can be. To me, you retire when you hit your number and feel like it's time to go. As you get near your number, that could be 6 months or 10 years away. One of the things you CAN do, though, is reevaluate that number. Was it maybe too conservative? Perhaps you can consider going ahead with your retirement plans anyways if you had a very conservative plan...just consider recent events to be the purpose that you built that cushion in the first place. One of the recent worries in the stock market for investors has been, "Is the market too expensive?" Well, that worry is getting taken out real quick...especially if we get another "meh" kind of year in 2019 due to this being a true bear market. Especially so if earnings projections hold up for 2019.

thriftyc

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #64 on: December 22, 2018, 09:03:53 AM »
Its all just a blip in my 40+ year investing.  Stay calm and rebalance on....

thriftyc

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #65 on: December 22, 2018, 11:00:37 AM »
Its all just a blip in my 40+ year investing.  Stay calm and rebalance on....
This. I've lowered my already very low expenses a bit, more cash heavy since a few months ago and will be fine. Just like I was in 2008. Now I'm waiting for the housing bubble to burst, especially the second home/vacation home market, 'cause I'm looking for some new ski digs ;-).

My newly FIREd sister (laid off and transioning to FIRE) on the other hand just got her last unemployment check the other day and is obsessively watching the markets and wondering if she should go back to work. I keep telling her to just ride it out until next year, keep her very very low expenses in check, (under $1000/month bare bones) use cash for now, and just see how it goes. She'll be eligible for a small pension at 55 and can easily bridge that gap just on cash. She moved towards more bonds when she got laid off last June as a buffer.. I think the top was in then too ;-).

Bonds are wonderful in times like these.  I maintain a lifetime allocation of 40% bonds / 60% stocks - all ultra low cost index etf's.  I usually just rebalance once a year in January.  However, I decided to rebalance this week to keep my desired allocation....

Korrywow

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #66 on: December 23, 2018, 03:12:42 AM »
Spartana, please let me know 3 months in advance before the real estate bubble bursts(joke!)...but seriously, l realize that all the economic indicators point to a recession but l see more upside.

Politically and economically, we are living in interesting times; and the economists and the fed are just guessing, as always. I think the p/e high of 2000 is reattainable if the Republicans win the next election.

I have a great townhouse in Reno, 45 minutes to Tahoe, that l really enjoy. (Reno is seriously underrated). Hopefully, l will sell it at the top...and then buy 2 more after the crash.



HBFIRE

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #67 on: December 23, 2018, 09:24:37 AM »
Prices have remained the same there since then but sales have slowed quit a bit.

Here locally (Huntington Beach), prices have come down some, and continue to come down.  Listing prices are getting lowered quite regularly.  I'm hoping to snatch something up in the next few years, but I'll be patient.

waltworks

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #68 on: December 23, 2018, 01:01:22 PM »
Spartana, please let me know 3 months in advance before the real estate bubble bursts(joke!)...but seriously, l realize that all the economic indicators point to a recession but l see more upside.

I have a great townhouse in Reno, 45 minutes to Tahoe, that l really enjoy. (Reno is seriously underrated). Hopefully, l will sell it at the top...and then buy 2 more after the crash.

“I will tell you my secret if you wish.  It is this:  I never buy at the bottom and I always sell too soon.” – Baron Rothschild

-W

TomTX

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #69 on: December 23, 2018, 08:18:58 PM »
I agree with sol on what you should be doing.  For me its about prudence in my portfolio, continuing to buy and rebalance through all sorts of market conditions, and personally I'm choosing a 3% SWR target vs. 4 to give me a bit more breathing room for these types of downturns.  Good luck!

The 4% SWR is more than capable of handling this downturn.

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #70 on: December 23, 2018, 08:33:49 PM »
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nation’s six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretary’s tweet.

...

“It’s going to raise the question of whether Treasury and Mnuchin know something the markets don’t,”

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/

pecunia

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #71 on: December 23, 2018, 09:50:12 PM »
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nation’s six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretary’s tweet.

...

“It’s going to raise the question of whether Treasury and Mnuchin know something the markets don’t,”

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/

From the article:

"As a result, several analysts warned that the outreach to banks could end up generating deeper anxiety. A decade ago, financial firms sharply pulled back from lending amid a financial panic, and federal officials frequently took action on Sundays as a way to try to arrest unease before Asian markets opened. But no signs have emerged that banks are facing any serious issues today."

Deeper anxiety - Well, like yeh.  Why is he telling us the banks are OK?  Didn't the banks crash in the great depression?  Well, there shouldn't be a run on the cash under my mattress.

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #72 on: December 23, 2018, 10:17:37 PM »
"Ladies and gentlemen, this is your pilot speaking. There is no reason for concern and the engines are functioning normally. That is all."

(Okay, but more seriously, this sounds more like either cluelessness on Mnuchen's part, or him trying to make it look to his boss like he's taking things seriously, rather than some sign of impending financial bad news, so I really wouldn't lose any sleep, pecunia. You've just gotta laugh at this sometimes.)

innkeeper77

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #73 on: December 23, 2018, 11:44:06 PM »
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nation’s six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretary’s tweet.

...

“It’s going to raise the question of whether Treasury and Mnuchin know something the markets don’t,”

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/

From the article:

"As a result, several analysts warned that the outreach to banks could end up generating deeper anxiety. A decade ago, financial firms sharply pulled back from lending amid a financial panic, and federal officials frequently took action on Sundays as a way to try to arrest unease before Asian markets opened. But no signs have emerged that banks are facing any serious issues today."

Deeper anxiety - Well, like yeh.  Why is he telling us the banks are OK?  Didn't the banks crash in the great depression?  Well, there shouldn't be a run on the cash under my mattress.

Just as a note of interest, the biggest run on banks in US History wasn't in the great depression, it was actually in 2007- the government was simply able to handle it a LOT better in 2007 than in 1930! Banks failed left and right but customers were made whole instantly, instead of the literal shutting of doors that happened in the 30's. (I am quite sure on the comparison, but don't have sources available right now)

ILikeDividends

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #74 on: December 23, 2018, 11:47:18 PM »
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nation’s six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretary’s tweet.

...

“It’s going to raise the question of whether Treasury and Mnuchin know something the markets don’t,”

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/

From the article:

"As a result, several analysts warned that the outreach to banks could end up generating deeper anxiety. A decade ago, financial firms sharply pulled back from lending amid a financial panic, and federal officials frequently took action on Sundays as a way to try to arrest unease before Asian markets opened. But no signs have emerged that banks are facing any serious issues today."

Deeper anxiety - Well, like yeh.  Why is he telling us the banks are OK?  Didn't the banks crash in the great depression?  Well, there shouldn't be a run on the cash under my mattress.

Just as a note of interest, the biggest run on banks in US History wasn't in the great depression, it was actually in 2007- the government was simply able to handle it a LOT better in 2007 than in 1930! Banks failed left and right but customers were made whole instantly, instead of the literal shutting of doors that happened in the 30's. (I am quite sure on the comparison, but don't have sources available right now)
And that's because there was FDIC insurance in 2007.  FDIC was not passed into law until 1933, so the 1930 failures wiped out a lot of depositors when the bank failed.
« Last Edit: December 23, 2018, 11:51:02 PM by ILikeDividends »

LAGuy

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #75 on: December 24, 2018, 04:12:10 AM »
I agree with sol on what you should be doing.  For me its about prudence in my portfolio, continuing to buy and rebalance through all sorts of market conditions, and personally I'm choosing a 3% SWR target vs. 4 to give me a bit more breathing room for these types of downturns.  Good luck!

The 4% SWR is more than capable of handling this downturn.

So, if I were to retire today should I plan a 4% rate based on the market high or what it is today?

It's kind of interesting to watch how many people were afraid to pull the trigger and retire at market highs and were planning very conservative withdrawl rates. Do they feel more comfortable retiring now in today's market? Would they still choose 3%? Or is 4% now more applicable?

EscapeVelocity2020

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #76 on: December 24, 2018, 05:24:52 AM »
So, if I were to retire today should I plan a 4% rate based on the market high or what it is today?

It's kind of interesting to watch how many people were afraid to pull the trigger and retire at market highs and were planning very conservative withdrawl rates. Do they feel more comfortable retiring now in today's market? Would they still choose 3%? Or is 4% now more applicable?

Well, there are two ways to be conservative if you never plan to earn another dime or increase expenses beyond inflation.  One is to lower your SWR to 3% since historically this gives 100% success (not too hard to do when markets are posting double digit returns and you are at 4% already, but it requires a OMY or two).  The other tact would be to ride out a bear market / recession until it puts in a bottom (you'll probably know about 6 months after the lows) then go with 4% on that amount.

This forum is more scrappy than that though - you'll hear a whole lot about side hustles, tightening the belt, and that time is more valuable than money.  You might want to spend some time on the 'Stop Worrying about the 4% Rule' thread to get up to speed.

There's also a really good discussion of what 4% SWR outcomes look like depending on sequence of returns on the intro page for https://www.firecalc.com/

LAGuy

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #77 on: December 24, 2018, 08:11:01 AM »
So, if I were to retire today should I plan a 4% rate based on the market high or what it is today?

It's kind of interesting to watch how many people were afraid to pull the trigger and retire at market highs and were planning very conservative withdrawl rates. Do they feel more comfortable retiring now in today's market? Would they still choose 3%? Or is 4% now more applicable?

Well, there are two ways to be conservative if you never plan to earn another dime or increase expenses beyond inflation.  One is to lower your SWR to 3% since historically this gives 100% success (not too hard to do when markets are posting double digit returns and you are at 4% already, but it requires a OMY or two).  The other tact would be to ride out a bear market / recession until it puts in a bottom (you'll probably know about 6 months after the lows) then go with 4% on that amount.

This forum is more scrappy than that though - you'll hear a whole lot about side hustles, tightening the belt, and that time is more valuable than money.  You might want to spend some time on the 'Stop Worrying about the 4% Rule' thread to get up to speed.

There's also a really good discussion of what 4% SWR outcomes look like depending on sequence of returns on the intro page for https://www.firecalc.com/

Oh, I've certainly read all that stuff. Just musing out loud really on how people close to retiring for good see things right now. It does kind of demonstrate though how silly the 4% rule is when you treat it like, well, a rule. I can't imagine anybody would retire in the current market and base their withdrawl rate on the market high, but the 4% rule says that should still work 95% of the time. So does that mean in a bear market a 5% withdrawl rate is safe?

FIRE47

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #78 on: December 24, 2018, 10:37:28 AM »
Here it is folks...

If the breakdown actually triggers a correction in the major us indexes look out below - were hanging on by a thread at this point a slight push and were looking at a further 5-10% plunge.

Trump is just the character likely to continue to giving the slight pushes we need to keep the downtrend going.

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #79 on: December 24, 2018, 11:16:09 AM »
Another -2.7% in the S&P at market close.

S&P 500 is 19.2 20% down from market peak.
NASDAQ down 23.9%.
Wilshire down 21%
VTI down 21.2%

I never really understood the “it’s a short trading day” so nothing is gonna happen argument.

Has been fascinating to observe my own emotional reactions in real time.
« Last Edit: December 24, 2018, 02:45:14 PM by maizeman »

cats

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #80 on: December 24, 2018, 11:21:52 AM »
"Ladies and gentlemen, this is your pilot speaking. There is no reason for concern and the engines are functioning normally. That is all."

(Okay, but more seriously, this sounds more like either cluelessness on Mnuchen's part, or him trying to make it look to his boss like he's taking things seriously, rather than some sign of impending financial bad news, so I really wouldn't lose any sleep, pecunia. You've just gotta laugh at this sometimes.)

I'm pretty sure Trump screamed at Mnuchin to "FIX THIS NOW!!!!" over the weekend and this is Mnuchin's frantic and poorly
 thought out result.  Or maybe Mnuchin stands to personally benefit from a stock market dip so he's happy to be spreading some jitters with the cover of "my crazy boss made me do it!".

Bumperpuff

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #81 on: December 24, 2018, 11:22:19 AM »
I agree with sol on what you should be doing.  For me its about prudence in my portfolio, continuing to buy and rebalance through all sorts of market conditions, and personally I'm choosing a 3% SWR target vs. 4 to give me a bit more breathing room for these types of downturns.  Good luck!

The 4% SWR is more than capable of handling this downturn.

My thinking is that if you have a mixture of stocks and bonds, you should be buying during the build up phase, and selling post RE, to maintain your desired asset allocation.  When stocks are high you'll naturally be selling more stocks, when stocks drop you sell more bonds. That's why you do an asset mix.

Right now, I'm just hoping that the market doesn't spring back before I can make my 2019 IRA contribution.

TomTX

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #82 on: December 24, 2018, 11:41:54 AM »
Another -2.7% in the S&P at market close.

I never really understood the “it’s a short trading day” so nothing is gonna happen argument.

Has been fascinating to observe my own emotional reactions in real time.

Still a ways to go before I need to put my money where my mouth is and remortgage equity out. I'm using VTI as my benchmark - a quick look at the chart seems to be 151.31 as the peak, so a 40% drop is near enough to 91. Close today was just under 120, slightly over halfway.

use2betrix

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #83 on: December 24, 2018, 02:11:46 PM »
I have no problem depleting my large F U/Emergency cash fund in times like these. Just dropped an extra $10k into VTSAX today. I “like” to have $50k for comfort due to the nature of my work, but current job security and income is high so I have no problem dropping it down to $20k for a while.

My investments are down around $40k-$50k and this is my first time experiencing a real drop. I’m actually 100% ok with it, and just praying for it to drop lower/stay lower because 2019 is going to be a HUGE savings year for me.
« Last Edit: December 24, 2018, 02:14:04 PM by use2betrix »

WhiteTrashCash

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #84 on: December 24, 2018, 02:44:03 PM »
On the plus side, at this rate, we'll get a most effective President in 2020. Silver linings and all.

BicycleB

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #85 on: December 24, 2018, 02:51:07 PM »
Good luck, @use2betrix! Also - @Bumperpuff, great description, I agree. Conceptually, at least - my implementation is a bit lax, as shown below.  ;)

As a person in thin-ish FIRE, this is sort of exciting. I was FIREd through a couple of dips before, but wasn't paying any attention due to personal matters. I literally didn't notice the 2016 dip at all, for example. 

I will acknowledge that it reassures me personally that my asset allocation has surprisingly little in stock, because about half my AA is just real estate equity (most of it used as rental property). So of 50% in financial assets, 70% is stock, or 35% of portfolio. Of that 35, maybe 25 is US stock. An S&P bear of 20% therefore means my wealth drops about 5%.

The above paragraph is about how I actually think of things - I multiply that 5% by the previous grand total, say "Oh, I'm down $20,000 since the last calculation, I must be around $480k now." I almost never actually check, but the accounts are usually within a few thousand dollars when I do.

Taking laziness to the extreme, that's my strategy!

Fwiw though, we're entering a fantastic time for US investors, I think. Jobs are plentiful and investment prices are falling. It should be a fine time for accumulating.

For personal reasons, I periodically think about returning to work. Maybe 2019 is the time...
« Last Edit: December 24, 2018, 02:53:18 PM by BicycleB »

justchristine

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #86 on: December 24, 2018, 03:03:31 PM »
I'm making lemonade out of lemons today.  My accounts are down about 60k from their peak earlier this year.  So today I sold some of my loser stocks for some sweet tax loss harvesting.  This market downturn is playing well in to my plan to move my old individual stocks into index funds.  I completely sold out of three full positions.  If this slide continues into the new year, I should be able to close out a few more positions.

Mighty-Dollar

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #87 on: December 24, 2018, 03:31:11 PM »
Seems like a pretty violent crash for nothing really being particularly wrong, and not even in recession.
And the hedge fund managers are LOVING this downturn as the US economy is looking robust. When average Joe investors panic and sell low, watch for a bounce to the upside beginning any day now as the pros capitalize. Sometime between Jan 26th and the first day of trading in January the rebound will begin.
Quote
So today I sold some of my loser stocks for some sweet tax loss harvesting.
And that's part of what's driving this downward movement.
« Last Edit: December 24, 2018, 03:34:06 PM by Mighty-Dollar »

justchristine

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #88 on: December 25, 2018, 01:08:19 PM »
Quote
So today I sold some of my loser stocks for some sweet tax loss harvesting.
And that's part of what's driving this downward movement.

If that's the case, it'll rebound nicely in three days when my sales settle and I can buy vtsax. 😊

marty998

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #89 on: December 25, 2018, 01:32:18 PM »
Seems like a pretty violent crash for nothing really being particularly wrong, and not even in recession.
And the hedge fund managers are LOVING this downturn as the US economy is looking robust. When average Joe investors panic and sell low, watch for a bounce to the upside beginning any day now as the pros capitalize. Sometime between Jan 26th and the first day of trading in January the rebound will begin.

The hedge fund managers and the "pros" are not as bright as you give them credit for. Likely that most of their short positions in their long/short funds would have performed extremely poorly over the last few years. Hence the size of their portfolios would be much smaller than traditional long only funds would have grown to.

It's therefore easy now to show relative outperformance when you've got less to lose and your shorts *finally* come good. The problem is, bear markets are not as long as bull markets (in both size and duration), so unless you are a brilliant stock picker of both ups and downs, your traditional equal long/short portfolio (factoring in borrowing and transaction costs, as well as additional management fees) is never going to do as well as a long only fund.

pecunia

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #90 on: December 25, 2018, 06:22:24 PM »
Another -2.7% in the S&P at market close.

S&P 500 is 19.2 20% down from market peak.
NASDAQ down 23.9%.
Wilshire down 21%
VTI down 21.2%

I never really understood the “it’s a short trading day” so nothing is gonna happen argument.

Has been fascinating to observe my own emotional reactions in real time.

I guess reality proves that the short day before Christmas doesn't mean anything.  I assumed these guys would kick back and let things be the status quo, but I guess they had their marching orders to sell.  Live and learn.

Looks like a few of you folks are suggesting 3 percent.   The following article says that too. 

https://www.thebalance.com/how-much-can-you-withdraw-from-your-retirement-portfolio-453997

A lot of folks find part time jobs after they retire.  I guess that could make up the 1 per cent.

What puts the brakes on these falling stock values?  Do the big guys come in and start snatching up bargain stocks?  Does it stop when the assets of the corporations overwhelm the outstanding stock shares?

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #91 on: December 25, 2018, 07:22:48 PM »
What puts the brakes on these falling stock values?  Do the big guys come in and start snatching up bargain stocks?  Does it stop when the assets of the corporations overwhelm the outstanding stock shares?

Lots of potential breaks on the fall. Dividend yields for the total stock market are up to about 2.4% after the latest price drop. As stock prices continue to fall (while earnings remain constant), stocks will become more and more financially appealing.

Other folks target P/E ratios or a certain % fall from the peak to start buying. Here in the thread TomTx is talking about pulling principle out of his house to invest if prices fall 40% from peak. There are a lot of people out there with a lot of money that they'll become willing to put into buying stocks at different price or P/E thresholds.

This is actually a graph from cryptocurrency, but the same principles apply in the regular stock market and this one looks nice.



The part in green show how many units (shares) people have standing orders to purchase as the price goes down. The part in orange shows how many units (shares) people already have standing orders to sell if the price goes up. The key take away here is that if I were to suddenly sell 40-50 units, I might be able to drive the price below $3880, but using up all the shares people are willing to buy at a given price gets harder and harder the further down we get from the current price.

You'll also see those vertical jumps in the green and red right at round price numbers. That's because more people will set their critical buy or sell price at round numbers (like $3850) then odd numbers (like $3852.45). This is why you'll hear people talking about "breaking through resistance" when, for example, the S&P 500 is close to crossing from 2499 to 2501. If it's going up, there are often more people willing to sell right around 2500 than at other prices. And if it's going down, there are often more people willing to buy right around 2500 than at other prices.

bacchi

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #92 on: December 25, 2018, 07:54:59 PM »
"Ladies and gentlemen, this is your pilot speaking. There is no reason for concern and the engines are functioning normally. That is all."

(Okay, but more seriously, this sounds more like either cluelessness on Mnuchen's part, or him trying to make it look to his boss like he's taking things seriously, rather than some sign of impending financial bad news, so I really wouldn't lose any sleep, pecunia. You've just gotta laugh at this sometimes.)

I'm pretty sure Trump screamed at Mnuchin to "FIX THIS NOW!!!!" over the weekend and this is Mnuchin's frantic and poorly
 thought out result.  Or maybe Mnuchin stands to personally benefit from a stock market dip so he's happy to be spreading some jitters with the cover of "my crazy boss made me do it!".

Yeah, I agree. Mnuchin asked "How high?" when Trump told him to jump. Unfortunately, Mnuchin didn't know enough about the delicacy of the position to just be quiet.

He may be out in the next few weeks, which could further rattle the markets. Or maybe there will be a sigh of relief.

TomTX

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #93 on: December 26, 2018, 04:54:33 AM »
You'll also see those vertical jumps in the green and red right at round price numbers. That's because more people will set their critical buy or sell price at round numbers (like $3850) then odd numbers (like $3852.45). This is why you'll hear people talking about "breaking through resistance" when, for example, the S&P 500 is close to crossing from 2499 to 2501. If it's going up, there are often more people willing to sell right around 2500 than at other prices. And if it's going down, there are often more people willing to buy right around 2500 than at other prices.

That's a really good point. Perhaps 39.5% off peak is a better trigger than 40% ;)

LAGuy

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #94 on: December 26, 2018, 08:34:02 AM »
40% down seems awfully pessimistic to me. The economic backdrop is still good. The average downturn has been around 30%; my personal guess is we don't quite hit that, down 25 to 30 and the bottom. I think the start of earnings season in 2 weeks, will show decent earnings that continue to slightly beat expectations. I'd think things will settle down then and we'll get a bit of a rally, if not the final trough. 

Mighty-Dollar

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #95 on: December 26, 2018, 01:44:12 PM »
Things just got better. Strongest holiday sales in years. Amazon reported record breaking orders.
Have you heard the phrase "Economists have predicted 10 of the last 3 recessions"?

aboatguy

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #96 on: December 26, 2018, 02:14:33 PM »
Maybe, maybe not.  We'll see.



However, tomorrow may be a different story or it may be another good day.

Dead cat bounce, start of another rally?  "Maybe, maybe not We'll see!"
« Last Edit: December 26, 2018, 02:20:56 PM by aboatguy »

steveo

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #97 on: December 26, 2018, 02:26:25 PM »
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

Thanks for this. I had always considered the option you listed above as a risk mitigator but now I see how that isn't true... (not that I'm anywhere near being able to utilize it).

I disagree with Sol on this point. I think having 2-5 years in defensive assets that you sell from when a bear market hits is a smart idea. McClung has a rule like only sell stocks when it is 1.2 times above your initial retirement point. If it isn't at that level sell bonds/use cash. Of course there may come a point when you have no choice but to use stocks and you can probably only fire that type of bullet once or twice.

mjr

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #98 on: December 26, 2018, 02:38:30 PM »
I disagree with Sol on this point. I think having 2-5 years in defensive assets that you sell from when a bear market hits is a smart idea. McClung has a rule like only sell stocks when it is 1.2 times above your initial retirement point. If it isn't at that level sell bonds/use cash. Of course there may come a point when you have no choice but to use stocks and you can probably only fire that type of bullet once or twice.

As do I.  I retired in August and due to my overly conservative nature and the fact that the market was red-hot, I kept many hundreds of thousands in cash.  I can outlast a 10 year long bear market :-)

Might I pay for this in terms of reduced returns over 30 years ?  Sure.  But my assets allocation is still 60% stocks, (or rather it was, I haven't recalculated it) and man it's worth it to be able to sleep so well during downturns like this.

I'll throw some decent amount into the market when the dust settles in the new year as well.  Looking forward to the higher returns on those sums.

« Last Edit: December 26, 2018, 03:31:00 PM by mjr »

HBFIRE

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #99 on: December 26, 2018, 02:55:46 PM »

As do I.  I retired in August and due to my overly conservative nature and the fact that the market was red-hot, I kept many hundreds of thousands in cash.  I can outlast a 10 year long bear market :-)

Might I pay for this in terms of reduced returns over 30 years ?  Sure.  But my assets allocation is still 60% stocks, (or rather it was, I haven't recalculated it), but man it's worth it to be able to sleep so well during downturns like this.

I too keep a healthy cash reserve, but mostly because I have a large amount in my business.  I'm FI, but since my business continues to run on its own, I'm actually quite happy with keeping a large cash position in the business.  During market downturns the psychological impact of knowing I have a lot of cash reserves that can be drawn at anytime if absolutely needed is very comforting.  This has made me realize I could never be 100% exposed in stocks, it would cause me too much stress.  I'm perfectly happy with a 60-70% equity position even with a slightly less ROI.  The other nice side of this is when there is a downturn, I can inject a healthy amount of cash into the markets, which I was able to do on Christmas eve.
« Last Edit: December 26, 2018, 03:00:02 PM by dustinst22 »